What You Need To Know About Mortgage Points Rates And Fees

There are additional costs associated with a mortgage that will be paid upon the closing of the mortgage that you need to be aware of and are explained in detail below:

Purchase Points:

Purchase points are an up-front fee paid to the lender at closing to buy-down or lower your interest rate over the life of the loan. Purchase points are also known as a "buy-down" or "discount points".  Each point equals one percent of the total loan amount. If you are looking at a $100,000 loan, one point would equal $1,000. The more points purchased lowers the interest rate, but will also increase the money needed at the closing.

If your plan is to live in the home for more than five years and can afford to pay more at the closing, it's a good idea to purchase points. The longer you live in the home, the more money you will save on interest over the life of the mortgage.

Interest Rate:

When you obtain a mortgage, you are charged an interest rate from the lender.  This is the rate charged for using the lender’s money to purchase the home. The interest rate determines how much your monthly payments will be on the loan. The higher the interest rate on the loan, the higher your monthly payment will be.

Interest rates on mortgages are constantly changing. If a lender quotes a specific interest rate, that's not to say you'll necessarily get that rate when you close on your loan, unless you formally “lock-in” that rate.  “Locking in” an interest rate with the lender guarantees the quoted rate on the loan. Lenders will allow you to “lock in” for 15, 45 or 60 days. It is important to keep in mind that the longer you “lock in” the interest rate the loan becomes more of a risk to the lender, and ends up making the loan more expensive.

Fees:

There will always be fees affiliated with obtaining a mortgage; fees cover the expense of processing and underwriting the loan. These fees can include charges for the following: ensuring that the title to the home is free and clear, paying for a land survey, and paying for a home appraisal which is used to estimate the value of the property. The lender will require an appraisal on the property in order to close on a mortgage.

All lenders are different and have various ways of charging for loans. OwnerWiz suggest that you shop around with several lenders to find the one you are most comfortable with that meets your individual needs.  Some lenders may charge lesser closing fees to lure you in, but may charge you a higher interest rate, which means you’ll pay more in the long run. So do your homework and make sure there are no hidden fees. Ask your lender a lot of questions so that you understand all the costs involved in obtaining a mortgage. A reputable lender will make sure that all of your questions are answered and that you have all the necessary knowledge of the loan and its process so you are comfortable doing business with them.